What are the returns like in a real estate syndication?

[Justin Goodin]

As with most investment vehicles, people are attracted by and curious about the possible returns. By investing passively in a real estate syndication, you can earn two types of returns: cash flow and profit split.

Cash flow returns are checks or direct deposits (typically on a monthly basis) from the time the deal closes until the asset is sold. Profit split returns are where the investors literally split the profit from the sale of the asset according to the structure outlined in the contract.

Here’s a great example, using round numbers for ease. Let’s pretend you invest $100K. You can look forward to a possible 8-10% in cash flow returns, meaning about $8K per year, which is about $667 per month.

Additionally, when the asset is sold (5 years later-ish), you could expect up to 40-60% returns on your initial capital investment. This means you’ll receive your $100K back (initial investment), plus maybe $50K in profit.

Adding it up in your head yet? Seeing $$$$$? Yep.

$8K cash flow returns per year + $50K in profit at the sale means you would have turned $100k into $200K in about 5 years.

Now, of course this all comes with the caveat that these are estimated returns that can vary based on market conditions, location, the deal structure, and many more variables. In no way is it guaranteed that you’d double your money. We’re saying it’s seriously possible though.

This is just one example of how returns work in syndications. Does anyone else had a different experience?